South Africa’s state-owned companies (SOCs) continue in financial disarray with combined profits falling from 0.8 per cent in 2015/16 to 0.3 per cent in 2016/17.

This was revealed in South Africa’s 2018 budget speech, tabled by the country’s Finance Minister, Malusi Gigaba, on Wednesday in parliament. In acknowledging the challenges with growing South Africa’s economy in 2017, Gigaba highlighted poor governance as the major hindrance of SOCs.

Capital spending by the major state-owned companies is projected at R368.2 billion over the medium term with several in financial distress.

In recent years, South Africa’s SOCs have been notorious for going to the government, cap-in-hand, asking for financial bailouts. In 2016/17, the six largest state-owned companies borrowed R98.1 billion. Earlier this year, even the country’s pensioners have bailed out the country’s power utility, Eskom, with a R5 billion loan through the Public Investment Corporation.

In recent months, government has installed new boards and senior managers at Eskom and South African Airways, with a mandate to stabilise these entities and restore good governance.

“State-owned companies are expected to fund their own operations… it is not fair for taxpayer money to be used for continual bailouts, caused by operational inefficiency and financial mismanagement,” says Gigaba.

Gigaba pledged to assist SOCs with a turnaround plan. He did not rule out supporting them financially in coming years, which he says could be done through a combination of disposing of non-core assets, strategic equity partners, or direct capital injections.

In this regards, Gigaba eluded to a property audit conducted by the Department of Public Works which shows that national government owns up to 195 000 properties, with an estimated value of over R40 billion.

“We will work with them on a programme to better utilize or dispose of these properties in the short to medium term. Government is finalising a framework on guarantees aimed at both reducing the exposure and improving the quality of the guarantee portfolio,” says Gigaba.

The Finance Minister further solidified that government will ensure that all SOCs are run sustainably and contribute to national development.